Milwaukee–In Milwaukee, there has been a tremendous amount of interest in multifamily assets of 150 units or more, reports Matt Fitzgerald, vice president and regional manager of mid-market offices in the Brookfield, Wis. office of Marcus & Millichap.

“It’s not distressed real estate,” Fitzgerald tells MHN. “It’s owners making business decisions to put property on the market. We have seen a tremendous amount of activity in those because they don’t come to the market too frequently.”

The interest is primarily from local and regional buyers, many of whom already have assets in Milwaukee, Fitzgerald notes, adding that the market has seen some new capital. Cap rates are between 7.5 percent and 9 percent, depending on location and asset class.

“Historically, people looked as Milwaukee as the stepchild of Chicago and not interesting. If they were going to make a move to the Midwest, they would [look] in Chicago, but some of those groups from the coast and other centers of capital are now are looking at Milwaukee,” he says.

“I’ve seen this before,” he adds. “Whenever there has been a major impact to the marketplace, the slow and steady nature [of the Midwest as a whole] has become attractive to certain types of investors who don’t want to ride the roller coaster of coastal markets or some of the Sunbelt markets.”

According to Marcus & Millichap’s most recent report on the market, older communities in core areas, including the City East and City West submarkets, are currently trading in the high-7 percent to low-8 percent cap rate range, and investors are paying cash. Investment activity is also expected to increase in outlying areas as investors look for discounted Class B and C properties in the Cuday/South Milwaukee/Oak Creek submarket, which has one of the tightest vacancy rates in the metro. Communities below the $5 million threshold and situated along major transportation routes will also attract significant interest, as prices have fallen nearly 30 percent from peak levels.

Additionally, Milwaukee is revealing several strong points, including strong demand for rental units, some job creation (the market is expected to add 14,600 jobs in 2011, with 6,000 jobs devoted to the manufacturing and construction sectors), low vacancy rates (of about 4 percent), limited new supply (only about 220 units are slated for delivery this year) and projected rent growth.

“We’re not seeing too many concessions as a whole, so we are seeing top-line rent growth,” notes Fitzgerald. This year, asking and effective rents are expected to increase about 2 percent and 2.4 percent, respectively.